India has witnessed many inbound and outbound cross-border mergers and acquisitions, which have been financed mainly through the international capital markets through innovative structures and financing schemes.
While the size of such transactions generally follows the ebb and flow of global economic tides, the established practice of “bed and breakfasting” in terms of deals structured through tax havens or low-tax jurisdictions, has been upset by Indian tax claims recently. This in turn means banks and investors financing such transactions, and even existing investors of both the seller and purchaser, must evaluate certain risks and perhaps also, their commitments.
It is a misconception that tax issues impacting an acquisition are only a driving factor for the seller and purchaser, especially since such considerations are now relevant for lenders and investors.
Sonali Sharma is a partner and Freddy Daruwala is an of counsel at Juris Corp. The firm is a full-service law firm based in Mumbai and specializes in financial transactions including capital markets and securities, banking, corporate restructuring and derivatives.
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